Tax garnishees to recover debts 107-05050040

Customers not receiving payments who have an outstanding debt without a payment arrangement are clients of interest (COI).

Automatic COI matching with the Australian Taxation Office (ATO) Taxpayer Records System may occur.

When a COI lodges their tax return, the ATO may send some or all of their tax refund to repay debt owed to the agency.

Tax garnishee decisions are not made in advance. Staff cannot confirm with customers whether a garnishee will occur.

The tax garnishee process is conducted in the following stages:

• A tax garnishee warning letter is issued to COI that are eligible for tax garnishee. The letter advises that the agency may ask the ATO to use amounts from tax refunds or similar payments to recover debt
• The following data is automatically sent to the ATO about the customer’s:
• Customer Reference Number (CRN)
• surname and either first or middle names
• date of birth, and
• address postcode
• COI matching to the ATO occurs, and an indicator is put on both records. The ATO sends mismatches or multiple matches to the Debt Program for follow up
• The ATO sends a trigger to the agency when a COI lodges their tax return or activity statement, and a refund or credit is due. The Debt Management Information System (DMIS) checks if the customer has any debts eligible for garnishee and where the customer:
• is not currently receiving a payment
• does not have a current or broken payment arrangement with the agency, and
• no repayments have been received in the last 14 days
• An electronic response automatically returns to the ATO. Services Australia will issue the garnishee notice to the postal address on the tax return. The garnishee notice goes to the customer's last known address recorded with the department if the tax return is:
• lodged by a tax agent
• an activity statement return
• The ATO returns the funds to the agency electronically with details going into DMIS and ESSentials
• Potential mismatches are then referred to an ATO Garnishee Liaison Officer

Note: between 1 January 2017 and 2 April 2017 debts recoverable under the A New Tax System (Family Assistance) (Administration) Act 1999 or the Paid Parental Leave Act 2010 were eligible for garnishee at any time. Some people's tax refunds may have been automatically garnisheed even if they had a current payment arrangement or they were receiving a Centrelink payment. This was correct processing.

Tax garnishees are not an acceptable recovery arrangement for Interest Charge (IC) purposes. Where garnishee of a tax refund occurs interest will continue to calculate and be charged.

For more details, see Interest charge for Centrelink debtors no longer receiving payments.

The tax garnishee process is unrelated to tax refund offsetting that happens with the ATO during family assistance reconciliation.

The automatic garnishee process determines if the customer has a family assistance debt subject to offsetting before applying a tax garnishee. This ensures the tax garnishee and family assistance tax refund offset do not occur simultaneously for the same debt/s, see Debt offsetting during family assistance reassessment, reconciliation and claim processing.

It is not cost effective to garnishee a tax refund when the CRN balance outstanding is less than $20.

Never tell a customer, their nominee or tax agent if a tax refund will be garnisheed. This is regardless of whether the debt is included in the tax garnishee process. This is important as tax garnishee decisions cannot be made in advance.

Non-Debt Staff speaking to customers worried about a tax garnishee should transfer the call to Debt Recovery.

A statement of account is included with the Notice of Assessment (NOA) if a tax garnishee is deducted from the refund. These notices are sent by the ATO. The statement of account will detail garnishees applied by the agency as 'Credit offset to Centrelink'.

Refer customer’s queries about tax refund amounts, after they receive their NOA, to tax agents for explanation. The agency does not support tax agents withholding money from customer’s tax refunds to repay agency debt outside of the existing process.

The automated tax garnishee process meets all legislative requirements under:

• Section 1233 of the Social Security Act 1991
• Section 89 of the A New Tax System (Family Assistance) (Administration) Act 1999
• Section 42 of the Student Assistance Act 1973, and
• Section 184 of the Paid Parental Leave Act 2010

It is not a legislative requirement for people to be warned or issued a garnishee warning letter prior to a garnishee being implemented. However, legislation requires the department to provide a copy of the garnishee notice to the debtor.

Once a customer is identified as a COI the garnishee must proceed. There is no legal requirement for the agency to refund an amount if the garnishee is implemented correctly.

If the customer requests a refund, see Garnishee customer does not agree with decision.

In certain circumstances the ATO may perform a tax assessment manually. The ATO will contact the Payment and Integrity Strategy Operations team if a manual tax assessment or adjustment is required.

Customers with the following write-off reasons are exempt from the automatic garnishee process and will not receive a garnishee warning letter:

• Bankruptcy Pending (BRP)
• Bankruptcy possible future recovery (BRT)
• Debt Agreement Current (DAC)
• Deceased - awaiting estate (DDE)
• Disaster temporary write off (DIS)
• Insolvency Temporary (Organisations) (IRT)
• Non Lodger Separated Couple (NLS)
• Outcome of review or appeal (ORA)
• Overseas appeal (NZ debts only) (OSA)
• Proceeds of crime (POC)
• In Prison (PRI)
• Short Term Hardship (STH)
• Excluded from Tax Garnishee process (TAX)

At times, a ‘mismatched record’ may occur for customers with similar names and date of birth. The ATO may request a reversal of an ATO garnishee or tax refund amount when:

• there is a garnishee or tax refund incorrectly applied
• the record appears to be a mismatch

The ATO Garnishee Liaison Officers will action these requests.

Staff actioning ATO Garnishee mismatch work require specific ICT access, see the Resources page.